What is Debt Review?

By The National Debt Review Center

What is Debt Review?

Debt review is a process that provides a legal means for consumers who are struggling with debt to manage their debt obligations in a structured manner. It is a debt relief mechanism that is available to individuals who are unable to meet their debt obligations due to financial hardship.

The debt review process is designed to help individuals regain control of their finances and prevent them from falling deeper into debt. It involves an assessment of the individual’s financial situation, the development of a debt repayment plan, and the negotiation of a new repayment arrangement with creditors.

In this article, we will provide an overview of the debt review process, including its benefits, eligibility requirements, and how it works. We will also explore the advantages and disadvantages of debt review, as well as the role of debt counsellors in the process.

Definition of Debt Review

Debt review is a debt relief mechanism that is available to individuals who are struggling with debt. It is a legal process that provides protection to consumers against legal action by creditors, as well as repossession of assets such as homes and vehicles.

The debt review process involves the development of a debt repayment plan that is based on the individual’s income and expenses. This plan is designed to help the individual repay their debts over a longer period of time, with reduced monthly payments that are affordable based on their income.

The goal of debt review is to help individuals regain control of their finances and avoid falling deeper into debt. It provides a structured and sustainable means of managing debt, while also providing legal protection against creditors.

Benefits of Debt Review

There are several benefits of debt review, including:

1. Protection against legal action: Debt review provides legal protection to consumers against legal action by creditors. This means that creditors cannot take legal action against the individual during the debt review process.
2. Reduced monthly payments: The debt repayment plan developed during the debt review process is designed to reduce monthly payments to a level that is affordable based on the individual’s income.
3. Extended repayment period: The debt repayment plan is also designed to extend the repayment period, which makes the monthly payments more affordable.
4. Consolidation of debt: Debt review also provides an opportunity for individuals to consolidate their debt into a single monthly payment, which simplifies the debt repayment process.
5. Financial management education: Debt review also provides individuals with financial management education and support, which can help them develop good financial habits and avoid falling into debt in the future.

How Debt Review Works

The debt review process involves several steps, including:

1. Application: Individuals who are struggling with debt can apply for debt review by contacting a debt counsellor. The debt counsellor will assess the individual’s financial situation and determine if they are eligible for debt review.
2. Assessment: The debt counsellor will assess the individual’s financial situation, including their income, expenses, and debt obligations. They will also review their credit report to determine the extent of their debt.
3. Debt repayment plan: The debt counsellor will develop a debt repayment plan based on the individual’s income and expenses. This plan will include reduced monthly payments and an extended repayment period.
4. Negotiation with creditors: The debt counsellor will negotiate with the individual’s creditors to develop a new repayment arrangement that is in line with the debt repayment plan.
5. Court application: If the creditors do not agree to the new repayment arrangement, the debt counsellor can make a court application on behalf of the individual to force the creditors to accept the new repayment arrangement.
6. Debt review order: If the court approves the debt repayment plan, a debt review order will be issued. This order provides legal protection to the individual against legal action by creditors, as well as repossession of assets.

7. Payment: Once the debt review order is issued, the individual will make payments according to the debt repayment plan. These payments will be made to a payment distribution agency, which will distribute the funds to the individual’s creditors.
8. Completion: Once the individual has completed the debt repayment plan, they will receive a clearance certificate. This certificate indicates that the individual has fulfilled their obligations under the debt review process.

How to Qualify for Debt Review

To qualify for debt review, individuals must meet certain eligibility requirements. These requirements include:

1. Over-indebtedness: Individuals must be over-indebted, which means that they are unable to meet their debt obligations.
2. Income: Individuals must have a regular income, such as a salary or pension.
3. Residency: Individuals must be residents of South Africa.
4. Unsecured debt: Individuals must have unsecured debt, which includes credit cards, personal loans, and store accounts.
5. Monthly income: Individuals must have a minimum monthly income of R3,500.
6. Documentation: Individuals must provide documentation to support their income and debt obligations, such as payslips, bank statements, and debt statements.

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The Role of Debt Counsellors

Debt counsellors play a critical role in the debt review process. They are registered professionals who are trained to assist individuals who are struggling with debt.

The role of a debt counsellor includes:

1. Assessment: The debt counsellor assesses the individual’s financial situation, including their income, expenses, and debt obligations.
2. Debt repayment plan: The debt counsellor develops a debt repayment plan based on the individual’s income and expenses.
3. Negotiation with creditors: The debt counsellor negotiates with the individual’s creditors to develop a new repayment arrangement that is in line with the debt repayment plan.
4. Court application: If the creditors do not agree to the new repayment arrangement, the debt counsellor can make a court application on behalf of the individual to force the creditors to accept the new repayment arrangement.
5. Payment distribution: The debt counsellor ensures that payments are made to the individual’s creditors according to the debt repayment plan.

Advantages of Debt Review

There are several advantages of debt review, including:

1. Debt consolidation: Debt review provides an opportunity for individuals to consolidate their debt into a single monthly payment, which simplifies the debt repayment process.
2. Reduced monthly payments: The debt repayment plan developed during the debt review process is designed to reduce monthly payments to a level that is affordable based on the individual’s income.
3. Extended repayment period: The debt repayment plan is also designed to extend the repayment period, which makes the monthly payments more affordable.
4. Protection against legal action: Debt review provides legal protection to consumers against legal action by creditors. This means that creditors cannot take legal action against the individual during the debt review process.
5. Budgeting assistance: Debt review provides individuals with financial management education and support, which can help them develop good financial habits and avoid falling into debt in the future.

Disadvantages of Debt Review

There are also some disadvantages of debt review, including:

1. Limited access to credit: Individuals who enter into debt review may have limited access to credit during the debt repayment period.
2. Increased debt repayment period: The debt repayment plan is designed to extend the repayment period, which means that the individual may be in debt for a longer period of time.
3. Possible negative credit bureau reporting: Entering into debt review may result in negative credit bureau reporting, which can impact the individual’s credit score and ability to obtain credit in the future.

Conclusion

Debt review is a debt relief mechanism that is available to individuals who are struggling with debt. It provides a structured and sustainable way to repay debt over an extended period of time. Debt review offers many benefits, including debt consolidation, reduced monthly payments, and protection against legal action by creditors. However, there are also some disadvantages to consider, such as limited access to credit and a longer repayment period.

It is important for individuals who are considering debt review to consult with a registered debt counsellor to assess their eligibility and discuss the potential benefits and drawbacks. By seeking assistance through debt review, individuals can take control of their debt and work towards achieving financial stability and security.

Book an appointment with a debt counsellor below.

You can book an appointment with one of our professionals by following these easy steps. Click the book an appointment page on the above menu or Call 0410125036 or Send a WhatsApp to 0727703674

20 frequently asked questions about debt review:

1. What is debt review? Debt review is a debt relief mechanism that is available to individuals who are struggling with debt. It provides a structured and sustainable way to repay debt over an extended period of time.
2. How does debt review work? Debt review involves assessing an individual’s financial situation, developing a debt repayment plan, negotiating with creditors, and making payments according to the debt repayment plan.
3. How long does debt review take? The debt review process can take up to five years, depending on the individual’s debt obligations.
4. How much does debt review cost? The cost of debt review varies depending on the debt counsellor and the individual’s debt obligations. However, debt counsellors are required to charge fees that are in line with the National Credit Regulator’s guidelines.
5. Will my credit score be affected by debt review? Entering into debt review may result in negative credit bureau reporting, which can impact the individual’s credit score and ability to obtain credit in the future.
6. Can I apply for debt review if I am under debt review? No, individuals who are already under debt review are not eligible to apply for debt review.
7. Can I still use my credit cards while under debt review? No, individuals who are under debt review are not permitted to use their credit cards.
8. Can I be blacklisted while under debt review? No, individuals who are under debt review are protected against legal action by creditors and cannot be blacklisted.
9. Can I cancel debt review? Yes, individuals can cancel debt review at any time, but they will be responsible for paying all outstanding debt obligations.
10. Will I be able to take out new credit while under debt review? No, individuals who are under debt review may have limited access to credit during the debt repayment period.
11. Can I negotiate with my creditors on my own instead of going through debt review? Yes, individuals can negotiate with their creditors on their own. However, debt review provides legal protection and a structured repayment plan.
12. What happens if I miss a debt repayment? If an individual misses a debt repayment, the debt counsellor will negotiate with the creditors to find a solution that is in line with the debt repayment plan.
13. Can I include secured debt in debt review? No, debt review only applies to unsecured debt, which includes credit cards, personal loans, and store accounts.
14. Can I apply for debt review if I am unemployed? No, individuals who are unemployed are not eligible to apply for debt review.
15. Can debt review reduce the amount of debt I owe? No, debt review does not reduce the amount of debt owed. However, it provides a structured and sustainable way to repay debt over an extended period of time.
16. Will my employer be notified if I enter into debt review? No, debt review is a confidential process and employers are not notified.
17. Can I apply for debt review if I am self-employed? Yes, self-employed individuals may be eligible for debt review if they meet the eligibility requirements.
18. Will I have to appear in court during the debt review process? No, individuals who enter into debt review are not required to appear in court.
19. Can I apply for debt review if I am a foreign national? No, only South African residents are eligible to apply for debt review.
20. Can debt review help me avoid repossession of my assets? Yes, debt review can help individuals avoid repossession of their assets by developing a structured debt repayment plan that is affordable based on their income.

These are just some of the frequently asked questions about debt review. If you are considering debt review, it is important to consult with a registered debt counsellor.

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